The Relationship Between Defense Expenditures and Economic Performance in Selected Countries

Year 2021, Volume: 2 Issue: 2, 22 - 30, 31.12.2021

Cihan Usta

Abstract

Abstract
There is no consensus on the impact on growth of military expenditures, which are included under the state expenditures planned by policy decision-makers, since they have different characteristics from the rest of the state expenditures. Military expenditures made in order to provide support for issues such as protecting the welfare of society, protecting the country's borders, defending against attacks from outside, protecting energy fields in order for economic growth to take place are being increased by countries day by day. Considering that dec jul is directly proportional to growth, countries are spending on production and R & D by providing the necessary infrastructure for the defense industry. Countries that have achieved a rapid technological acceleration from an industrial point of view ensure the security of their own nation, which is one of the social state requirements, protect their borders, and minimize their costs and external dependence. Countries can follow independent policies in case of possible threats with technological advances. This study aims to examine the worldwide history of the defense dec and the relationship between military expenditures for the defense industry and economic performance in selected countries by conducting a panel data analysis. In the analysis, Turkey, Azerbaijan and Pakistan, which are in close social, cultural and economic relations, were included in the analysis and the period 1992-2019, when there were no difficulties in providing data, was considered. The growth rates in real gross domestic product per capita as an indicator of economic performance, while using military spending as an indicator of the share of military expenditure in gross domestic product was used. As a result of the analysis, it was concluded that an increase in military spending has a negative impact on economic growth. It can be said that military expenditures have a negative impact on growth in the relevant countries due to the fact that they are carried out instead of efficient investment expenditures.

Keywords

Military Expenditures, Economic Performance, Granger Causality Test, Panel Data

References

• Apergis, N., & Payne, J. E. (2010). Renewable energy consumption and growth in Eurasia. Energy Economics, 32(6).
• Atlı, Y., A Practical R&D Project Selection Methodology for the Turkish Armed Forces, Unpublished Master's Thesis, Yeditepe University, Institute of Science, Istanbul, 2000.
• Asteriou, D., & Hall, S. G. (2007). Applied Econometrics: a modern approach, revised edition. Hampshire: Palgrave Macmillan, 46(2), 117-155.
• Bilgili, F., & Uğurlu, E. (2007). “Interaction Between Growth, Foreign Direct Investments and Domestic Investments”, Erciyes University Journal of Social Sciences Institute, 23 (2), 127-152.
• Brzoska, M. (1995). “World Military Expenditures”, Handbook of Defense Economics I, (Ed: Keith Hartley and Todd Sandler), Amsterdam: Elsevier Science B.V., 45-67.
• Chudik, A., & Pesaran, M. H. (2013). Large panel data models with cross-sectional dependence: a survey. CAFE Research Paper, (13.15).
• Davutoğlu, A., Strategic Depth; Turkey's International Position, Küre Publications Istanbul, 2003.
• Support, M. A. (2016). “The Relationship Between Military Expenditures And Economic Growth In NATO Countries: Panel Data Analysis Under Cross-Section Dependency”. International Journal of Management Economics & Business, 12(28), 209.
• Dunne, P., Nikolaidou, E., & Vougas, D. (2001). Defense spending and economic growth: a causal analysis for Greece and Turkey. Defense and Peace Economics, 12(1), 5-26.
• Durgun, O., & Timur, C. M. (2017). The Relationship Between Defense Expenditure And Economic Growth: Turkey Analyzes. Dumlupınar University Journal of Social Sciences, 54, 126-137.
• Duyar, M., & Koçoğlu, M. (2014) The Effect of Military Expenditures on Economic Growth; The Case of Sub-Saharan Africa, International Journal of Social Studies, 703-722
• Giray, F. (2004). Defense Expenditures and Economic Growth. Cumhuriyet University Journal of Economics and Administrative Sciences, 5(1), 181-199.
• Güvenek, Burcu; Alptekin, Volkan (2010), “The Relationship Between Energy Consumption and Growth: A Panel Data Analysis on OECD Countries”, Journal of Energy, Market and Regulation, 1, 172-193.
• Karagol, E., & Palaz, S. (2004). Does Defense Expenditure Deter Economic Growth in Turkey? A cointegration analysis. Defense and Peace Economics, 15(3), 289-298.
• Kaya, E., & ÇEVİK, D. O. (2019). An application on defense industry data with box-jenkins method in time series analysis (Master's thesis, Karamanoğlu Mehmetbey University).
• Looney, R. E. (1995). The Economics of Third World Defense Expenditures, in: Contemporary Studies in Economic and Financial Analysis, vol. 72, JAI Press, London
• Mucuk, M., & Alptekin, V. (2008). The Relationship between Tax and Economic Growth in Turkey: VAR Analysis (1975-2006). Journal of Finance, 155, 159-174.
• Nadaroglu, H. (1985). Public finance theory. Beta Publishing and Distribution Inc.
• Saraçöz, Y. (2018). The importance of the defense industry and the effects of defense expenditures on the country's economy (Master's thesis, TOBB ETU Social Sciences Institute).
• SSM, “2009 -2016 Defense Industry Sectoral Strategy Document”
• Szidarovszky, F., Gershon, M. E., and Duckstein, L. Techniques for Multiobjective Decision Making in Systems Management, Elsevier Science Publishers B.V., Netherlands, 1986.
• Tabucanon, M.T., Multiple Criteria Decision Making In Industry, ElsevierScience Publishing Company, Inc., New York, 1988.
• Tatoğlu, Ferda (2012), “Advanced Panel Data Analysis”, Beta Basım A. Ş., Istanbul, p. 199-233-240.
• TEKELİ, Esat, “A Comparison Between America and Russia in the Talk of Foreign Aid”, Cumhuriyet, February 7, 1958. “The Last Forms of American Aid”, Cumhuriyet, July 24, 1958.
• The World Bank, Online Access: http://data.worldbank.org, Accessed: 04.02.2017.
• Topçu, Y., An Integrated Decision Support Model for Multi-Criteria Problem Solving, Unpublished Doctoral Thesis, ITU Institute of Science and Technology, Istanbul, p, 19-25, 2000.
• Topcu, M.K. (2010). Effects of Defense Planning on the Economy and Defense Budgets, Journal of Defense Sciences, Vol. 9, No. 1, p.77.
• Torun, Erdal Presentation titled “Defense Industry Security” at the Turkish Defense Industry Assembly Meeting on September 30, 2010
• Tugen, K. (1988). Developments and Economic Effects of Defense Expenditures in the World and in Turkey, Dokuz Eylul University Journal of FEAS, 285-302.
• Turk, H. K., (2007). The Economic Effects of the Turkish Defense Industry and the Econometric Modeling of the Defense Expenditure-Growth Relationship, Çukurova University Institute of Social Sciences, Department of Economics, Master's Thesis (Unpublished), Adana.
• Yıldırım, J., Sezgin, S., and Öcal, N. (2005). Military Expenditure and Economic Growth in Middle Eastern Countries: A Dynamic Panel Data Analysis. Defense and Peace Economics, 16(4), 283.